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$24B left Canada in 2012. Here’s what happened to it

People working in Canada send billions to their home countries each year, an ordinary-sounding task that has far-reaching effects. This Star series explores where the money goes and what it means — both to those who receive it and those who give it.

Each month, Sheryl Jacosalem would send some of the money she earned in Canada to her family in the Philppines. It helped put her siblings through school and to build a home for her parents. (Keith Beaty / Toronto Star) | Order this photo

The money sent overseas each year by people living in Canada could buy about 70 jumbo jets, mountains of sparkling engagement rings, or more than a third of Starbucks Corporation, depending on the day: $24 billion goes a long way.

According to the
World Bank
, that’s how much ordinary people living and working here sent to their home countries in 2012: The money may go to a grandmother in Beijing, a niece in Kingston or a cousin in Jaipur.

It might be for groceries, the electric bill or school fees; or it could be meant to celebrate a birthday, an anniversary or a wedding. It may be earmarked to repay a debt or help start a business. Most aren’t sending much money at any one time: $200 is an average sum.

She came to Canada from the Philippines — via Hong Kong — in 2009 and worked for more than three years as a nanny in Thornhill. Every payday, she would send at least half of her earnings, sometimes more, home to her family.

It was about $500 on the 15th of every month; if she could, and it was needed, she would send a bit more at the end. That money put four sisters and a brother through school, and now — three of her sisters have joined her here in Canada — the family is putting the finishing touches on a house they have built for their parents in Iloilo.

“We grew up with nothing, and so we want them ... we don’t want to worry,” Jacosalem, 36, says. “We just don’t want to worry that we’re here in Canada and we don’t know what’s going on with them there. We want them safe and we want to make sure they are always OK.”

Jacosalem and her sisters are emblematic of the many people living and working in Canada who regularly send money to their home country: It’s an ordinary-sounding task, which has remarkable, far-reaching effects.

Money doesn’t just make the world go ’round — money also goes around the world. In 2012, the most recent year for which figures are available, nearly $530 billion (U.S.) was sent globally by migrants to their home country. Projections are that remittances — which is what money or assets sent overseas are called — like migration, will continue to rise.

The numbers could be even higher than the World Bank figures show:
according to Pew Research
, a non-partisan think-tank, “if unofficial remittances were counted, the total could be as much as 50 per cent higher or more” — another $265 billion.

Because many countries don’t track remittances — either sent or received — the World Bank figures are an estimate, determined through a statistical model using data it can collect. (Here, no federal bodies, including the Bank of Canada, Department of Finance, Department of Foreign Affairs, International Trade and Development, Citizenship and Immigration Canada, or the Financial Transactions and Reports Analysis Centre of Canada say they hold information on remittances.)

Unofficial remittances are money transfers through unrecorded channels, such as the hawala system, in which moneylenders in places like Pakistan, North Africa and the Middle East, working outside the banking system, facilitate international transactions.

“The numbers are staggering, because there are so many migrants out there that the small amounts sent add up to large volumes, like $500 billion,” says
Dilip Ratha
, the World Bank’s lead economist on remittances. “There is an extremely human emotion behind remittances, unlike foreign aid and investment, where there are strategy considerations, where there are investment considerations.

“This one is really more about helping family,” he says. “So it is like helping yourself.”

Canada sends more money, per capita, overseas than other developed countries. (The U.S. is the largest remitter by far, sending nearly a quarter of that global $500 billion: Mexico is their top recipient country, with $22.8 billion, followed by China, which receives about half that.)

For Canada — where, according to Statistics Canada, nearly seven million people living here were born elsewhere — most of the countries that receive remittances aren’t surprising: China. India. The Philippines, where Jacosalem and her sisters send money and packages. But millions of dollars also flow from Canada to European countries, like the United Kingdom, Germany, France and Italy.

For some nations, remittances help keep the country afloat. A
2012 United Nations report
says that over the last decade, remittances have “steadily surpassed” foreign direct investment in the world’s least developed countries.

In the Philippines, for example, where 10 per cent of the country’s 100 million citizens have left to find work abroad, remittance cash has been used for improvements to roads, schools and hospitals, and has connected cities to the water and electrical grids.

In Pozorrubio, an agricultural city north of Manila, remittance money has had a multiplier effect. Residents have used remittances to start businesses like daycares, Internet cafes and car rental services. Donations from abroad have helped to finance a rural health centre and have paid for the city’s fire truck.

Remittances have been Somalia’s lifeline since the government collapsed in 1991. With almost one-tenth of the country’s citizens living abroad, and no official banking system within Somalia, money sent home by relatives has been vital for basic needs such as food and clothing.

Now, that money is helping to fund a construction boom, and as the security situation improves — despite threats from Al Qaeda-linked Al Shabab — Somalia’s vast diaspora is following their money back home, to start new businesses or work within the government.

It’s not just faraway countries that benefit from remittances. In the Caribbean, according to a
Bank of Jamaica report
, tourism accounted for only slightly more than remittances to the country in 2012 — $2.069 billion vs. $2.042 billion. The World Bank figures say $305 million of that came from Canada.

The positive effects of remittances on the people and countries receiving them are clear, but the question persists: Would it not be better for Canada if the $24 billion were to stay here? One major bank economist says the figure is relatively small compared to Canada’s total economy of about $1.7 trillion — and Ratha, of the World Bank, points out that Canada is getting something of considerable value back.

“You can ask, are remittances a net drain on the host economy?” Ratha says, and then answers the question. “Remittances are not a drain on the host country because the migrant has already earned that money. The migrant has done work to earn that money.

“It is not charity that he or she has received — it is payment in exchange for work,” he says, noting the migrant also pays taxes in Canada. “After you work and you get paid, it is up to you whether you use the money in Canada, or send money to the Philippines, or buy a house, or blow it in a casino.”

Remittances look different depending on both where they are sent from, and where they are sent. Bangladesh, for example, receives most of its remittances from migrant workers in places like India, Saudi Arabia, Kuwait and Oman. A 2009 World Bank report said 64 per cent of remittances came from migrant workers, rather than members of the diaspora.

Some countries don’t allow migrants to hold bank accounts or invest in property in the country in which they are working, so they have no way to keep their money safe and must send their earnings home.

That can be an expensive proposition. In Canada, groups like
ACORN
— which advocates for low- and moderate-income families — have campaigned against what they say are “exorbitant” fees to send money abroad. After the 2009 G8 conference in L’Aquila, Italy, world leaders called for the same: “to cut the commission on remittances made by immigrants to their native countries by 50 per cent, from the current 10 per cent to 5 per cent, over 5 years.”

“When you look at the whole picture, that extra $15 that you pay, or that extra $20 that you pay — or, if you go to the bank, that extra $40 that you pay — that could be helping with your transportation costs. That could be buying something extra healthy in your groceries,” says Marva Burnett, who came to Canada from St. Vincent and volunteers with ACORN. “It’s unnecessary. Even if they reduce it to 5 per cent, they’re still making a huge profit.”

Migration to Canada is different than somewhere like the Emirates, both because of the migrants who arrive here — the immigration points system discourages entry by low-skilled workers — and because of the hope by many that a home could be found here.

Jacosalem and her sisters, for example, ultimately chose Canada because it offers the possibility of permanent residency. And that means how, and how much, many migrants to Canada remit changes over time.

Most migrants send a higher percentage of their income to their home country when they first arrive. That tends to decline the longer they stay, because migrants are building a life in their new countries and need to earmark funds for their children’s schooling, or a mortgage or to start their own businesses.

“When people come in with a mindset to stay in Canada, they would send money home of course in the beginning, but there is a fairly rapid remittance decay over the years,” says Ratha of the World Bank. “Increasingly, they would remit a lower percentage of their incomes — not the dollar amount, mind you, it is a lower percentage of income, because income is rising — and they would save an increasing amount for themselves in Canada, for purchasing that house that they would need in future.”

That was the experience of Ahsan Amed, who came from Pakistan in 1988. An only child, he left his mother and father in Lahore, eventually settling in Toronto. His parents had helped finance his journey to Canada, and he was keen to both pay them back and look after them.

“This is the cultural difference. Over there, the son has to take care of the family,” Amed, now 48, and the owner of two taxis, says. “At that time, I felt like my father made the sacrifice over there to send me here, so that’s why I felt it a lot at that time. But slowly, they didn’t need it. In the beginning, they needed it.

“But now, it’s a different story. I have three teenagers, I have a wife — my life is here now. Everything is here. My kids are born here. I have a mortgage to pay. I have expenses to pay.”

Amed’s mother still lives in Pakistan, and he is happy to send her money occasionally.

Some migrants will say they don’t resent the obligation to send money home: they are the lucky ones, and so looking after those with fewer opportunities is their privilege.

“For me, it’s given with an open heart and an open hand, but we also take into consideration that it’s our responsibility because in a way, we have it better than they have it there,” Burnett says. “It’s from the goodness of your heart.

“And not to plug St. Vincent, but that’s just the way we are. We’re kind people. And in other words, we are obligated. St. Vincent is only so big and you’re obligated to help your families back home.”

Burnett arrived in Canada about three decades ago, and she has interrupted her morning Bible study to chat about why she sends money home. It’s the most natural thing, she says — and a question about if she’s ever tempted to keep some of the cash, maybe to treat herself to something special, is greeted with a puzzled look.

“In the home countries, they’re developing and they don’t have as much as we do out here,” Burnett says. “A lot of people are unemployed, we’re the ones who are working, and in the Caribbean I think it’s a family thing, you know, that we help each other when we can. It’s what we do.”

Ratha agrees.

“Is remitting a burden on the migrant? The answer is yes. Sometimes it is pleasurable, sometimes it is not,” he says. “Up to a point, it is actually entirely an obligation. But it is the same obligation a son in India would feel for a father, an older father who is not working anymore and has no place to go.

“When we say it is an obligation, it’s not a negative sense ... it’s a good obligation.”

That obligation — even for migrants who have been in Canada for decades, and may no longer remit regularly — is most keenly felt when a natural disaster hits, such as the
typhoon that decimated parts of the Philippines
last year. Here, groups like the Toronto Filipino Centre sprang into action, sending much-needed supplies and raising funds to help — funds that are also considered remittances.

“We did big fundraising here,” says Wendy Arena, a now-retired insurance professional who volunteers at the centre on Parliament St. Like other organizations across the country, they gathered supplies and medicines like antibiotics to send back home — as well as about $150,000. “We helped. We did.”

Arena says it doesn’t matter how long people have been away from their home country — a disaster brings everyone together. Patricia Landolt, a sociologist at the University of Toronto who specializes in migration, agrees, and says allegiance to one country doesn’t prevent a person from fully being a part of a new community.

“You ask people, they’ll say, ‘Yeah. I’m Canadian. I’m Chilean. I’m both of these things.’ And that is not a difficult thing to reconcile for them,” Landolt says. “Collective remittances for me are really emblematic of very much belonging, because you have the capacity to move Canadian institutions to do these projects that is transnational.

“That’s civic engagement in Canada,” she says. “If that’s not belonging, I don’t know what is.”

Ratha says that migration — those who remit, and those who do not — gives a country more than just the migrants’ labour. It enriches Canadian society, he says, making it lusher, more interesting — and more productive.

“If you didn’t have migrants, the place would be boring and cold,” he says, not referring to the weather. “People have two identities. Is that good for one identity or not? If there is a Filipino who is still connected to the Philippines because of remittances and the sense of having an identity there, and then staying in Canada and also feeling that he or she is a Canadian, is that good or bad for Canada or for the Philippines?

“It seems to me that at least on the diversity count, being connected is better.”

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